Courts from California to New York have long held landlords accountable for contributory trademark infringement in knowingly leasing real property for unlawful trades, manufacture or business, when those landlords rent space to tenants who sell counterfeit or "knock off" merchandise. Most of these cases involve flea market or "swap meets". However, recent cases involving federal trademark law and local property regulations have allowed "brand" manufacturers to more readily sue mainstream landlords. Several upscale manufacturers have aggressive landlord enforcement programs to protect their brands. Lawsuits include a variety of civil actions as well as criminal prosecutions. Although most of these cases settle, landlords who resist are often faced with adverse judgments exceeding $1 million.
Although most cases involving landlord liability are able to provide evidence that the landlord was previously put on notice of a potential violation, a retailer could allege that a landlord "should have known" a trademark violation was taking place due to the apparent business practice of the tenant. Landlords should take heed of these cases and take a more active role in vetting the specific use of their tenants and be vigilant in taking action if they have reason to suspect that violations are occurring. Use clauses for local merchants who sell name-brand merchandise at heavy discounts should specify that no counterfeit merchandise may be sold, and indemnities should be added protecting landlords from claims alleging the same. However, these protections, including indemnity provisions in leases, may not be sufficient where the landlord takes no action to stop the illegal activities. Where luxury brands that are rarely discounted are being sold for less than half their regular price, landlords should investigate and take pre-emptive action. If landlords wait until they get sued by the brand manufacturer or distributor, they have already waited too long.